The Changing Role Of Procurement, The Changing Form Of Procurement Processing

By Author: Donald Nason
Total Articles: 44

The role of procurement has been changing over recent years, developing into a far more strategic part of a business. This is in part recognition of the increasingly substantial amounts of funding required for organisational purchases, and with this change in perception of role has come a need for improved procedures and which has led to a growing move towards electronic processing.

Often decentralised and highly paper-intensive, traditional requisition and order processing can be inefficient and costly. For many finance and/or procurement chiefs it is now a major priority to source a solution to improve efficiency and reduce the cost burden.

One of the main points to emerge last week from an informal meeting of ministers of the EU Competitiveness Council (Internal Market and Industry) was that modernising public administration across Europe was vital to promoting competitiveness – with particular emphasis put on the importance of moving to electronic processing for public procurement.

The meeting in Vilnius 22-23 July was chaired by Lithuania’s Minister of Economy, Evaldas Gustas, who says that automating procurement processing can ‘maximise benefits’. He also said, “End-to-end e-procurement... can maximize the efficiency of public expenditure and become a new source of economic growth”.

In April 2012 the EU announced in ‘Delivering savings for Europe: moving to full e-procurement for all public purchases by 2016’ that “Increasing the use of e-procurement in Europe can generate significant savings for European taxpayers... E-procurement can also participate in providing new sources of economic growth and jobs. The European Commission has adopted a communication setting out a strategy to make the use of e-procurement the rule in the EU by mid-2016.”

The EU reported at the time that public entities which had already moved to e-procurement estimated savings of 5-20 percent on procurement processing costs, and the ministers at the Vilnius meeting concluded that EU member states should be encouraged to move to e-procurement.
Investing in an automated solution streamlines the procure to pay process.

Purchase requests are made simpler with user-friendly online input which can include automatic population of known fields and preferred supplier selection option/enforcement. Multi-level authorisation enhances control, while audit trail and historical information facilitate identification of problem areas.

Moving to an electronic solution gives a business the benefits of centralisation, while at the same time allowing for individual business requirements to be met – for example for specific routes for purchase type, business area or vendor to be defined – plus there is now no further need for re-typing information. In addition, the business gains from the reduction in costs associated with moving away from a paper based system – for processing, stationery, postage, storage.

According to an article in Supply Management this week, the head of procurement at Newcastle University is expecting to achieve a £2.5m saving in procurement costs this year following the university’s move to electronic processing.

With an annual budget of around £160m, the decision was made in 2009 to move from a system Neil Addison called “arcane”, the new system coming properly online in 2011 and resulting in a saving of £1.7m of savings in the first year.

From KPMG’s paper ‘The Power of Procurement’ – “Not so long ago, Procurement was considered to be an add-on service... Today however, many executives are increasingly looking to Procurement to engage the business in strategic conversations about how the supply chain can be optimised to deliver the greatest returns.”

Could moving to electronic procurement processing bring benefits to your business?